Value Sparked by Vulnerability

Written by Marsha Shenk

More than two years ago, two articles came across my screen, and I wrote about them. They're highly relevant today, as the world shudders in fear of 'the downturn'. Commerce is an amazingly resilient force.

Notice the ingenuity that broke through what anyone formerly believed was possible. Both are based on an underlying question which has deep roots in the ancient infrastructure of commerce - as old as the first human community.

What kind of exchange might make it possible for us both to thrive?

This question is the key that opens what I call The Master MovesTM.

Both challenge me in a big way, and I hope they will do the same for you.

From C.K. Prahalad's piece, "The Innovation Sandbox":

"In Bangalore, India, the cost of a Western-style hotel room is typically US$250 to $300 per night. But the indiOne hotel charges $20. The indiOne is modern; every room includes an attached bathroom, an LCD television, a wireless broadband connection, a small refrigerator, a coffeemaker, and a work area. The common areas include a pleasant cafeteria, an ATM, a business center, and a small gym. The hotel, which positions itself as the provider of ?smart basics? for the intelligent traveler, is very profitable. Its gross margins were 65 percent in 2005, compared with 30 to 40 percent for typical luxury hotels. And the business model is scalable...

...the Narayana Hrudayalaya cardiac care center, located in Bangalore, is one of the world's largest providers of heart surgery and other forms of cardiac care, including care for children. A private corporation, it was founded in 2001. Only three years later, in 2004, the company performed 7,500 cardiac surgeries and treated 60,000 outpatients, including almost 2,000 telemedicine patients who received consultation and treatment at remote sites, accessing specialists through satellite- and Internet-based telecommunications links.

It's important to note that the facility and its parent company, Narayana Hrudayalaya (NH), are profitable.

...the "Jaipur Foot", a prosthetic foot made from rubber, intended for below-the-knee amputees, such as people injured by accidents and land mines. The JF (as it is universally called) costs about $30, a fraction of the $8,000 to $10,000 cost of a similar Western prosthesis; if a patient damages, loses, or outgrows it, he or she can simply get a new one.

...Another example is the Aravind Eye Care system, the world's largest provider of cataract surgery. This company, founded in 1976, performed 240,000 surgeries in 2004 and treated 1.6 million outpatients. The founder, Dr. G. Venkataswamy, has said that his goal is to "wipe out needless blindness". Thus, Aravind treats more than 60 percent of its patients free Ñ and continues to operate profitably.

And from a U.S. News article (10/31/05) by Michael Satchell:

Wiping out TB and AIDS

    By the early 1990s, [Paul Farmer, a Harvard-trained physician with a PhD in Medical Anthropology who built a clinic in Haiti] his clinic had become a well-equipped center, with trained community health agents serving 100,000 people around Cange. Farmer and his staff enjoyed mounting success in treating infectious diseases, spending $150 to $200 to cure TB patients in their homes compared with $15,000 to $20,000 in a U.S. hospital setting. In 1993, the MacArthur Foundation recognized his work with a $220,000 grant that he plowed into his burgeoning program.

    [Farmer and Jim Yong Kim built Partners in Health.] Several people shared credit for PIH' s growing success, none more than co-founder Jim Yong Kim, who was born in South Korea and grew up in one of the only two Asian families in Muscatine, Iowa. Like his friend and fellow Harvard student, Kim was a physician and medical anthropologist with M.D. and Ph.D. degrees. Kim focused his energy on helping Farmer design better treatment protocols and badgering U.S. and foreign pharmaceutical companies to cut deals for cheaper and more-effective drugs.

    In 1996, PIH faced an outbreak of patients with drug-resistant TB in a Lima, Peru, shanty town. Instead of trying the usual frontline antibiotics, which didn't work, PIH administered a carefully calibrated regimen of as many as seven other drugs to patients in their homes, along with needed social services. Cure rates exceeded a stunning 80 percent--better than in U.S. hospitals.

    Now Farmer and Kim-who later received his own MacArthur genius award--had a larger goal: to wipe out TB throughout Peru and in other developing countries. And they saw no reason that their successful PIH treatment model couldn't be applied to other catastrophic infectious diseases like HIV/ AIDS and malaria. That required serious money. Kim had been building a relationship with the Bill and Melinda Gates Foundation, and in 2000, the foundation gave PIH $45 million.

    That was enough to allow PIH not only to launch a nationwide TB offensive in Peru but to establish a pilot project in Russia as well. More funding soon followed. In 2002, PIH received a $13 million grant from the Global Fund for new facilities and equipment for improvements at the Cange medical complex. Last April, the William J. Clinton Presidential Foundation launched a $10 million HIV/AIDS initiative, and PIH is responsible for establishing the first phase in Rwanda. And in September, PIH was awarded the 2005 Conrad N. Hilton Humanitarian Prize of $1.5 million for significantly alleviating human suffering.

There is no doubt that commerce will change the face of the world many times in this century - for-profit or not. New products and technologies will reach new people, who will shift the forces at work in the marketplace. Wealth, knowledge, and power will be redistributed. The context of the question:

What kind of exchange might make it possible for us both to thrive?
will change - in some cases dramatically. Perhaps we could say that the real question is:

Given our interpretations of the circumstances in which we find ourselves, what kind of exchange might make it possible for us both to thrive?

Certainly in the articles above, people observed their own context differently than did others around them, and therefore they were able to design new ways to address what they wanted to achieve. They reinterpreted what was impossible.

Prahalad speaks about choosing to redefine 'constraints' in order to generate innovation:

Innovations like these are not just technological or market breakthroughs. They change people's lives. The hotel, by facilitating travel for many more businesspeople, could greatly expand commerce in India. The stove could improve the lives of millions of people. The process for designing both of these breakthrough innovations started with the identification of the following four conditions all of which are difficult to realize, even when taken one at a time:

  • The innovation must result in a product or service of world-class quality.
  • The innovation must achieve a significant price reduction - at least 90 percent off the cost of a comparable product or service in the West.
  • The innovation must be scalable: It must be able to be produced, marketed, and used in many locales and circumstances.
  • The innovation must be affordable at the bottom of the economic pyramid, reaching people with the lowest levels of income in any given society.
  • In countries like India, with 700 million bottom-of-the-pyramid consumers at varying levels of income, the need for innovations that meet these criteria is now becoming obvious. The seemingly impossible demand of a hitherto unserved customer base - a $20 hotel room in an environment of $250 to $300 hotels, or a cookstove for use by an impoverished villager Ñ became, in this case, a specification for starting the innovation process.

    This approach could be called an innovation "sandbox" because it involves fairly complex, free-form exploration and even playful experimentation (the sand, with its flowing, shifting boundaries) within extremely fixed specified constraints (the walls, straight and rigid, that box in the sand). The value of this approach is keenly felt at the bottom-of-the-pyramid market, but any industry, in any locale, can generate similar breakthroughs by creating a similar context for itself. In India, several such breakthroughs are taking place now, in a global industry that is otherwise plagued by high costs, stultified traditions, a variety of regulators, a perennially dissatisfied customer base, and a reputation as an exceptionally difficult venue for business innovation.

    Business is the source of power in the modern world. As I read these articles, I am moved by how much more we could be doing.

    As the energy of Fall rearranges your priorities, I invite you to take another giant tack at design in your enterprise. What is currently 'impossible' in your industry? Might a new look reveal a hidden gateway to hundreds of millions of new customers, market leadership, and rich new profit centers?

Are You Fit to Thrive in Any Economy?